A substantial portion of Director Cordray’s remarks yesterday at the American Bankers Association’s Annual Convention in New Orleans was directed at justifying the Bureau’s decision not to delay the January 2014 effective dates of the new mortgage rules. Mr. Cordray reminded bankers that if the CFPB had failed to complete the rules, most of Title XIV of Dodd-Frank “would have taken effect in its own right in January 2013” and they “already would have been living under those provisions for quite some time with no guidance to resolve ambiguities and subject to whatever interpretations the courts might eventually arrive at through litigation.”  

He also tried to explain why bankers should prefer the Bureau’s rules to Title XIV, highlighting Title XIV’s total ban on charging points or fees on any loan on which a bank paid compensation to a loan originator, the absence of a “clear safe harbor” against litigation for all prime qualified mortgage loans, and the absence of any special QM provision for loans kept in portfolio by small creditors. 

As he has done previously, Director Cordray tried to temper the CFPB’s unwillingness to delay the rules’ effective date by suggesting that the CFPB intends to take an approach of being reasonable in enforcement with banks that have made a good faith effort to comply with the new rules. He told bankers that he wanted to “assure” them that the CFPB’s “oversight of the new mortgage rules in the early months will be sensitive to the progress made by institutions that have been squarely focused on making good-faith efforts to come into substantial compliance on time – a point that we have also been discussing with our fellow regulators.” 

Unfortunately, industry can only take limited comfort from the Bureau’s apparent plans not to insist on full compliance by January. While the CFPB may be willing to take a “sensitive” approach to compliance, industry should not expect a similar approach from plaintiffs’ attorneys. 

Director Cordray also reminded bankers of the role consumer complaints play in the Bureau’s exercise of its supervisory and enforcement authority, observing that “the patterns reflected in those complaints can prompt investigations or be the basis for prioritizing supervisory attention through the risk scoping of examinations.”